Abstract
It takes a biotechnology venture a long time to conduct research and development, and uncertainty regarding its success as an enterprise is high. Therefore, when a corporate evaluation is performed by the usual DCF method, an estimate of its current value may be too low and it may not be possible to make a suitable investment judgment. Corporate evaluation of such a biotechnology venture can be performed by using the real options analysis method to consider the required funds in each development stage and the probability of its success. For two cases, a drug discovery venture and a gene-analysis venture, corporate evaluation is performed using two techniques, the real options analysis method and the DCF method, and the effectiveness of the real options analysis method is discussed.
